The UK budget unfortunately did not put a spring in GBP’s step, as we can see in the currency's performance vs the G10 below. However, GBPUSD did trade back towards 2024 highs as US job numbers disappointed. Firstly the ADP payrolls report showed that only 140,000 jobs were added in February vs an expectation of 150,000 additions. Also JOLT job openings showed a slowdown in job openings, and the JOLTS quit rate fell to the lowest since 2018 (excluding the pandemic) – illustrating that the job market is weakening. Fed Powell’s remarks that rate cuts could happen even if inflation doesn’t fall to 2% also dragged USD weaker. Treasury yields declined and USD fell the most in a month. EURUSD hit the highest levels since the end of January.
Speculation over an imminent rate hike by the Bank of Japan continued overnight after earning numbers came in higher than expected, as well as hawkish comments by BoJ member Junko Nakagawa. JPY is stronger across the board as a result.
*Daily move - against G10 rates at 7:30am, 07.03.24
** Indicative rates - interbank rates at 7:30am, 07.03.24
Focus today will fall on the EUR, with the ECB rate decision. No rate change expected today, and we expect the language to follow recent rhetoric of waiting for data over Q1 before deciding on when to cut rates. What will be more interesting will be the ECB’s projections on growth and inflation for the rest of the year, and ultimately what ramifications this has on when the ECB will cut interest rates.
USD seems unlikely to move much today as markets will rather wait for cues from tomorrow’s nonfarm payroll numbers. Yesterday’s Spring Budget was a damp squib, so GBP likely to be muted as well.
Yesterday the lower JOLTS quit rate, alongside a softer ADP number and Powell's remarks, saw USD fall the most in a month. A lower quits rate illustrates that people are finding fewer opportunities to ask for pay rises by changing jobs. Ultimately a lower quit rate signals a weaker jobs marker, lower wage pressures, and thus slower inflation.
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